Operation Improvement Inc.

To the politician, Business exists to provide jobs and pay taxes. But, as one economist noted, important jobs with life or death consequences (and presumably a correspondingly high employee self-esteem) could be created overnight by placing the unemployed in charge of busy intersections and turning off the automated traffic lights. This easy change, if mandated, would create many jobs but would destroy wealth. “Broken Window” economics creates jobs in the short term, but what about tomorrow?

To the naive, Business exists to ‘get’ money. By this poor standard, cat burglars, grifters and extortionists could meet the definition of businessman. An immature child of a financially secure home might think in terms of of how to get ‘his share’ of the family pie, but the adult that characterizes “distribution of natural abundances” or “rationing of scarcities” as the fundamental economic issue is destructively wrong.

To the entrepreneur, business is the only tool that can create substantial new wealth. Its somewhat obvious how machinists, welders, and even artists and writers create values – but how does the businessman do it? There are three essentials, and one is fundamental.

Businesses take long-term risks with capital, and innovate. If successful, they cause energy, materials and, most importantly, time to be used more effectively. Failing businesses waste everyone’s time and money, and destroy wealth. Successful innovators are always reformulating in order to extravagantly ‘waste’ the least expensive and most abundant commodity in order to recycle, conserve and spare the most precious. This has always been the nature of enterprise and has never needed the pious urgings and second-guessing of under-employed eco-worriers.

New jobs and new markets for existing products and services are natural consequences of expanding wealth. Our distracted American business culture sometimes loses sight of this. They forget that every serious, sustainable and profitable product and service makes their customers, suppliers and employees wealthier. (A sale should always be ´win/win´). Other than the frivolous, why do you buy any product or service? It’s good for you! “Working America gives at the office.”

In addition to innovation, a successful business must “milk the cow”,or if you prefer: “Feed the goose and collect the golden eggs.” More than one brilliant business innovation has been frittered away by leaders who measured the importance of correct, consistent and capable operations by their own lack of interest. Operations savvy is about more than just ´cutting costs´. Looking for the proverbial “one less olive per jar”, nickel and dime-ing customers on fees, and squeezing employees, is a parody and a misdirection.

Finally, there is a complex and fascinating third element in the creation of wealth. Its proper discussion exceeds the scope intended for this brief article. I will mention it only to hold a place for future discussion, and that is the power of conceptual integrity to create wealth. If you are intrigued with this teaser, I will leave with you the two words that are the key: “Know Thyself.”

P.J. O’Rourke attributed one of my favorite jokes to President Reagan in this article.

A traveling salesman stays overnight with a farm family. When the family gathers to eat there’s a pig seated at the table. And the pig has three medals hanging around his neck and a peg leg. The salesman says, “Um, I see you have a pig having dinner with you.”

“Yes,” says the farmer. “That’s because he’s a very special pig. You see those medals around his neck? Well, the first medal is from when our youngest son fell in the pond, and he was drowning, and that pig swam out and saved his life. The second medal, that’s from when the barn caught fire and our little daughter was trapped in there and the pig ran inside, carried her out and saved her life. And the third medal, that’s from when our oldest boy was cornered in the stock yard by a mean bull, and that pig ran under the fence and bit the bull on the tail and saved the boy’s life.”

“Yes,” says the salesman, “I can see why you let that pig sit right at the table and have dinner with you. And I can see why you awarded him the medals. But how did he get the peg leg?”

“Well,” says, the farmer, “a pig like that–you don’t eat him all at once.”

is not the same as thinking for oneself.